Bank of America
Bank of America reported a fourth-quarter profit of $700 million or $.03 a share, beating the consensus EPS estimate among analysts polled by Thomson Reuters by a penny, after the company pre-announced a large mortgage putback settlement with Fannie Mae ( FNMA) and a major contribution to the $8.5 billion foreclosure settlement between federal regulators and the nation's largest loan servicers. Earnings for all of 2012 totaled $4.2 billion, or 25 cents a share, increasing from $1.4 billion, or a penny a share, in 2011. Bank of America CEO Brian Moynihan said during the company's earnings conference call that the company had achieved "strong results" in strengthening its balance sheet, as the company built a $19 billion reserve for mortgage putbacks and increased its estimated Basel III Tier 1 common equity ratio to 9.25% as of Dec. 31, which is significantly above the 8.5% that will be required in January 2019, when the Federal Reserve's enhanced capital requirements for systemically important financial institutions are fully phased in. When discussing the company's efforts to lower its expenses, Moynihan said "We have reduced our employee count in each quarter in the last five and we have done that while we continue to invest in our targeted growth areas," and that "we reduced our delinquent mortgage count, which allowed us to reduce our
Citigroup reported fourth-quarter earnings of $1.2 billion, or 38 cents a share. Excluding credit valuation and debit valuation adjustments, the company earned $2.2 billion or 69 cents a share, missing the consensus estimate of 96 cents. Citigroup's earnings were reduced by charges related to its restructuring announced in the fourth quarter, as well as a declining release of loan loss reserves. Net income for all of 2012 totaled $7.5 billion, or $2.44 a share, declining from $11.1 billion, or $3.63 a share, in 2011. The company said that excluding credit and debit valuation adjustments, losses on minority investments and costs from the company's fourth-quarter repositioning, 2012 operating earnings totaled $11.9 billion, increasing from $11.1 billion in 2011. During the company's earnings conference call, Citigroup CEO Michael Corbat -- who replaced Vikram Pandit in the top spot after Pandit was shown the door in October -- was asked by CLSA Securities analyst Mike Mayo the following question: "If in five years from now you were to look back at your performance, what would you want to see to show that you were successful?" Corbat replied that "we've got to get to a point where we stop destroying our shareholders' capital. That would certainly be at the top of the list. That we run a smart and efficient business that's good at its allocation of its resources around its customer and client segments, that it's continued to have the ability to lead and accompany those clients around the world, that it served a social purpose." Bloomberg later reported in an investor alert that Mayo had upgraded Citigroup to a "Buy" rating from "Outperform," with a $50 price target.
PNC Financial Services Group ( PNC) was the sector winner, with shares rising 4% to close at $62.01, after the Pittsburgh lender reported fourth-quarter earnings of $719 million, or $1.24 a share, compared to earnings of $925 million, or $1.64 a share, in the third quarter, and $493 million, or 85 cents a share, in the fourth quarter of 2012. In keeping with the industry's "kitchen sink" theme for clearing out extraordinary items in the fourth quarter, PNC had preannounced $91 million in expenses related to mortgage foreclosures, including $70 million for the industry settlement. Other items included " a pretax provision of $254 million for residential mortgage repurchase obligations related to expected elevated levels of repurchase demands primarily as a result of further changes in behavior and demand patterns" of Fannie Mae and Freddie Mac, as well as ""a $45 million goodwill impairment charge for the company's mortgage unit, and a gain of $130 million on the sale of Visa ( V)." Together, the items lowered PNC's fourth-quarter earnings by 47 cents a share. Another major item affecting the fourth-quarter earnings was a $318 million provision for credit losses, increasing from $228 million the previous quarter, and $190 million in the fourth quarter of 2011. CFO Rick Johnson explained during the company's conference call that the provision "higher than the previous guidance of $150 million to $250 million, primarily due to the completion of our implementation of regulatory guidance for loans discharged from bankruptcy. A provision of $53 million was recorded in the fourth quarter related to this guidance." Net income for 2012 was $3.0 billion, or $5.30 a share, declining slightly from $3.1 billion, or $5.64 a share in 2011. Jefferies analyst Ken Usdin said in a note after the earnings announcement that PNC's core earnings looked "closer to $1.60-$1.65."
Capital One Disappoints
After the market closed, Capital One ( COF) reported fourth-quarter net income available to common stockholders of $825 million, or $1.41 a share, missing the consensus estimate of $1.59, among analyst polled by Thomson Reuters. Earnings declined from $1.173 billion, or $2.05 a share, in the third quarter, with CFO Gary Perlin saying that "seasonal expense and margin trends led to a reduction in fourth quarter earnings compared to the previous quarter." Capital One's revenue declined to $5.625 billion in the fourth quarter from $5.782 billion in the third quarter. The company provided 2013 guidance, saying it expected "average quarterly revenue levels in 2013 to be consistent with the fourth quarter of 2012, as a modest decline in earning assets will be offset by a steady to slightly higher net interest margin." The company reported a sequential 45 basis point narrowing of its net interest margin, to 6.52%. Please see TheStreet's detailed earnings coverage for more on Capital One's fourth-quarter results. Capital One's shares were down over 7% in aftermarket trading, to $57.10.
Email. Follow @PhilipvanDoorn